Impending elections keep stock market investors on the sideline

KUALA LUMPUR: Election jitters are keeping investors on the sideline.

The local equity market is expected to remain lukewarm due partly to the impending general election, coupled with a need for corporate earnings to play catch up with current valuations, said UOB Asset Management (M) Bhd CEO Lim Suet Ling.

“Our market is consolidating now. Also, some foreign funds could be profit taking.

“In addition, the market tends to be quiet when a general election is around the corner. You don’t want to be taking any strong bets until things are more certain,” said Lim.

The benchmark FTSE Bursa Malaysia KL Composite Index has been trading between 1,760 and 1,780 points since mid-June, after rising more than 9% since the beginning of the year.

On corporate earnings, Lim said it is definitely growing and that there have been upward revision, especially in Asian stocks.

“We are seeing corporate earnings growth but the market is taking a break for the earnings to catch up,” she said.

Lim was talking to reporters at the launch of the United Global Income Focus Fund (UGIFF) by UOB Asset Management and Wellington Management Singapore Pte Ltd.

UOB Asset Management has assets under management (AUM) of RM7.61bil as at August 31. Wellington Management has AUM of US$1 trillion worldwide.

The UGIFF is a multi-asset fund. It aims to offer investors regular income and capital appreciation by investing in a broad spectrum of global asset classes that outperform in different economic environments.

The fund is targeting a return of between 4% and 5% per annum, distributed quarterly.

Meanwhile, Wellington Management Singapore investment director Andrew Sharp-Paul said the markets are restless because of the changes in the role of central banks as active participants in the asset markets.

“One of the key drivers of uncertainties in the market involved the central banks, which had driven liquidity in the market.

“But this is changing, albeit very gradually. For example, the US Federal Reserve is in the process of interest-rate normalisation,” he said.